Clean solar energy in rural Honduras 

SDGValle SolarClean electricity for nearly half a million families – 480,000 – and the elimination of some 78,000 tonnes of carbon dioxide emissions annually: the Valle Solar project in Honduras is living up to its promise.

It has relieved the national electricity shortfall, created jobs and infrastructure in a poor rural area, and boosted generation of renewable energy. Valle Solar can also improve the country’s balance of payments, when there is less need for oil imports.

Valle Solar is one of two identical solar plants located near the city of Nacaome on the Pacific coast. When they began operations in 2015, their total rated output was 100 MW, the largest of any solar park in Latin America at that time.

Inhabitants are important partners

Power plant projects typically offer large-scale employment during the construction phase. Building Valle Solar provided about 500 jobs. Now that it is operating, the work consists largely of maintenance and needs far fewer employees – 53 in 2017.

Valle Solar emphasises its environmental and social responsibility, as well as the importance of cooperation with local inhabitants. It has established a fund for community projects, which is jointly administered by the company and local people. In an area that suffers from drought, the fund has worked from the outset to improve the water supply to the local community. Its current projects are related to health, the environment, education and municipal engineering.

“We have a strong and high standard on social and environmental,” says Eduardo Arias, General Manager of Compañía Hondureña de Energía Solar (COHESSA), the company responsible for Valle Solar. “Our standards exceed legal requirements because we care about communities and we regard our neighbours as our partners.”

Valle SolarThe company provides funding and support for various community projects through a Social Responsibility Fund. In 2017, they funded for example construction of school classrooms for children in neighbour school, construction and drilling of wells as well as construction of water storage tanks to provide water for local communities.

COHESSA was founded by Adolfo Larach, a Honduran with whom Finnfund had previously worked in the La Vegona hydropower project.

“We are long-term committed to continue the development of renewable energy in Honduras, whilst developing long-term relationships with communities close to our projects. We promote their economic and social development based on respect and permanent support to assist them with management capabilities, funds, training and project executions,” says Adolfo Larach.

Finnfund’s financial commitment in Valle Solar is about 14 million US dollars, consisting of a loan and mezzanine finance. Other participants include development finance institutions like the IFC, part of the World Bank Group, and Austria’s OeEB.

Finnish technology from ABB and Ensto

Valle SolarValle Solar uses equipment supplied from Finland by ABB and Ensto. The Finnish ABB company provided 52 inverter and medium-voltage stations for the project. Finnfund was responsible for introducing ABB to Valle Solar. It was selected as the technology supplier in competitive tendering.

The inverter stations each include two solar power inverters and associated equipment developed in Finland. The medium-voltage stations, designed and manufactured at ABB’s factory in Vaasa, Finland, consist of transformers and switchgear. The contract includes the monitoring and control system, and local maintenance.

ABB estimates the value of the contract at about 20 million euros but the deal was additionally significant for giving ABB a reference for its technology in Central America, a market traditionally dominated by North American companies. It was also a major breakthrough into the local market for Ensto, the Finnish company that supplied ABB’s equipment.

More background information on the project and the roles of ABB and Ensto in this video.

Country: Honduras
Sector: Solar Power
Year of investment: 2015

Exploiting renewable energy to mitigate climate change

One of Finnfund’s objectives is to promote clean power generation. It finances energy projects both directly and via private equity funds that concentrate on renewable energy.

Finnfund’s investments in renewable energy generally focus on power plant construction, which has direct development impacts via job creation and infrastructure engineering like roadbuilding. The construction phase typically requires goods and services from local suppliers, which has a positive impact on the local economy. At the same time, better roads and transport links allow local farmers and businesses to bring products to market from a wider area.

On completion, the plant produces clean power, reducing the need for other power sources, like diesel generators, that create pollution. This cuts carbon dioxide emissions and serves to mitigate climate change.

The greater availability of electricity stimulates the economy, stabilising the power grid and reducing electricity prices. Together or separately, these impacts boost production, creating ongoing benefits in employment and economic growth. In addition to power plants, Finnfund finances off-grid solar systems such as Mobisol, operating in East Africa. Such systems generate electricity and light and bring significant benefits to households because they are cheaper and healthier than the inefficient, polluting kerosene lamps that are widely used.

More information:

• Video: Clean energy for thousands of Honduran homes
• International Finance Company (IFC), Stories of Impact: A Solar Plant Lights up a Community in Honduras
Solar Park to ease Power Shortfall in Honduras (News 8.6.2015)
• OeEB: Better living conditions through vibrant economy
• Development impact of Finnfund investments in 2016: Jobs, prosperity and sustainable development

Photos: OeEB, Austrian DFI


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